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OPERATOR: Excuse me, everyone. We now have our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the presentation, we'll open the floor for questions. And at that time, instructions will be given if you'd like to ask a question.

I'd now like to turn the conference over to Paul Stares. You may begin.

PAUL STARES: Thanks very much. Good morning, everybody, and welcome to this Council on Foreign Relations media conference call on the upcoming visit by Secretary of State Hillary Clinton to Asia that begins this weekend.

I'm Paul Stares, director of the Center for Preventive Action here at the council. And I'm joined by two of our leading Asia experts, Sheila Smith, who is a senior fellow in Japan Studies here at the council, and Elizabeth Economy, who is the C.V. Starr senior fellow and director of Asia Studies at the council.

We're basically, I think, going to frame this call along the lines of the actual order in which Secretary Clinton is going to be visiting the region. And as many of you know, she begins in Japan and then ends in China with visits to Indonesia and Korea in the middle. I think we're going to start with Sheila Smith to talk about the trip to Japan and then end up with Liz on China. And I'd be happy to answer any questions that people may have about Korea since I've been working on this issue recently.

Why don't we get started? And I turn to you first, Sheila. The Japanese are clearly very happy that Secretary Clinton is beginning with her Asia trip with Japan. And they clearly are reassured that Japan still counts in Washington's calculus. Tell us what are the leading sort of issues that she's going to be bringing up with the Japanese and what she's looking to hear from them.

SHEILA SMITH: Thank you, Paul. I'd be delighted. I think, you know, as excited as the Japanese are, I think it's important for all of us to remember that the real accomplishment here and the key is that Secretary Clinton is visiting Asia first. And our long-term interests, American long-term interests are deeply entwined with Asia's future. And I think that statement that she is going to that region first is a very important one to make.

And yes, of course, the Japanese are delighted that Tokyo is first on that Asian agenda. As many of us are aware, the relationship between the U.S. and Japan is a long one. It's a deep one, yet there's been a little bit of nervousness in Tokyo about this new administration and about the longer-term agenda for the U.S. and Japan.

I think, in a way, this is a nice place to start for Secretary Clinton because Japan, she has articulated a smart power approach to the U.S. diplomatic agenda under the Obama administration. And smart power is Japan's strong suit. They call it civilian power. They talk about comprehensive approaches in their diplomacy. But I think in terms of both the style and the substance, I think this is a good moment for the U.S.-Japan partnership.

I think also there's an opportunity here for Secretary Clinton to present a slightly new narrative in terms of how we think about our partnership with Japan. I think we need to demonstrate the capacity of this relationship. We need to be pragmatic and focused. And we have to solve problems together, and I think that's something that many people in Tokyo are hoping we can talk about or they can talk about with the secretary.

There's a host of agenda items. My guess is that this is a moment to introduce herself to the leadership in Tokyo and to find that sense of common purpose. They will be talking about many things, most immediately, of course, will the economic stimulus package and stabilizing the global financial system. You know, consultations with the G20 will be in April, and so I believe that will be something that they will talk about.

But the real sort of challenge and the most important point for the Japanese, of course, is the collective diplomatic approach to North Korea. Pyongyang is already indicating is may resort to saber rattling during her visit, or at least threatening that. But I think this is an opportunity to set the tone for the broader reconsideration of the six-party process and how Tokyo and Washington can be in step as they work with Korea, with China and with others on this process.

There's a couple of other issues we can talk about in the discussion but one last issue that I think will be important for the secretary and that is to remember that Tokyo's nervousness, in part, comes from a sense that the Japanese are in a very different strategic environment than they've ever been before. It's a dangerous neighborhood if you sit in Tokyo. And I think a statement at least that the deterrent capability of our alliance is firm and that this administration will continue to tend that aspect of the alliance will be important.

STARES: There's been reports that a new special envoy to North Korea is about to be announced. And there was some concern that there was really no mention in the lead-up to the visit that North Korea would be sort of front and center. The Japanese must feel, as South Koreans, too, that Washington is finally getting ready for reengagement on North Korea after a period of some uncertainty about who would fill that position. Is that a fair assessment?

SMITH: I think that's a very fair assessment. I think there's two things to remember about the North Korea issue, though, is that it evokes some very deep sentiments in Japan. But I think that this approach to the visit, in fact, that the secretary has articulated an agenda, not just for Japan but for other countries as well, that is not focused solely on North Korea, I think, is a very positive approach. Yes, we have to deal with North Korea. Yes, it's an immediate problem confronting this administration. But we don't want to have our entire Asian diplomatic agenda captured by Pyongyang and what happens in Pyongyang at the moment.

So I think, in a way, she's carved out an agenda that takes us a little bit away from that domination of Asia diplomacy by North Korea. But I think you're absolutely right that if the envoy, especially the name that's circulating in the press, that a new envoy being announced would help, I think, reassure those specific concerns.

STARES: Last question before turning to China. What can the Japanese do specifically to help out in the global financial crisis? Are there any things? You know, a lot of people say we have things to learn from the Japanese, but how can they contribute to this?

SMITH: Well, I think they already have. Prime Minister Aso at the first G20 meeting, of course, came with a commitment to the IMF, a considerable commitment to the IMF, in terms of reserves. So I think Japan's strength is going to be the fact that it has cash and that it's willing to dedicate those resources to the stabilization of the global system of economic financial management.

The more troubling, of course, is whether or not our economic house will be in order. And the response in Tokyo to this stimulus package and to Secretary Geithner's announcement was less than enthusiastic. Just like here, the stock market plunged in Tokyo, in fact across Asia. So I think there will be some real serious consultations needed between the Japanese and the United States on how to restore confidence.

The Japanese themselves at the private sector level are probably more equipped to help out in that way than the government is. But I think Prime Minister Aso's beginning at the IMF is a positive one.

STARES: Good. Well, thank you, Sheila.

Let's turn to Liz now. Liz, Secretary Clinton is going at a time to Beijing at a time of some uncertainty about the future of U.S.-China relations. There's been calls for us to be tougher with the Chinese over currency issues, trade policy, yet we also desperately need their support on other issues, anything from global warming to Iran to North Korea to Sudan. Tell us how Secretary Clinton can sort of reconcile these competing pressures or imperatives and what are the principal issues you see arising with her talks in Beijing.

ELIZABETH ECONOMY: Well, I think before she sets out to reconcile the priorities, you know, she has to reacquaint herself with the region and with China, in particular. I mean, I think it is the first time in about 15 years since she gave her speech for the woman's conference that she's been to Beijing. And you know, the country has been transformed, not only economically but, to some extent, politically and certainly in terms of its role in the world.

So I think what she's entering into in many respects is a very different political and economic landscape from what she had encountered, you know, a decade and a half ago. So I think the first thing she needs to do is to get her bearings about what China has become over the past 15 years.

I think the second thing really -- and I think this is important, and I think others have mentioned it -- is that this, in many ways, should be a listening tour. She began her effort here to become a senator here in the state of New York with a listening tour, and I think that's primarily what she should do in China.

Traditionally, the United States has gone to China, has negotiated with China and interacted with China with a sort of long laundry list of things that we want form the Chinese, that we want them to do, whether it's on climate change or, you know, on the financial system reform or trade, whatever it might be, human rights. We have many, many things that we want the Chinese to do.

China has a much shorter list. And to some extent, I think, we need to hear from the Chinese what it is that their priorities are in the relationship with the United States. Because in some sense, that's how we're going to get any leverage in this relationship.

I think, in terms of the overall state of the relationship, it's not bad. I think there's, you know, been a commitment over two, three decades now to stability in the relationship. And we've had very few periods where the relationship has spiraled down. And when it has, it's sort of reemerged pretty quickly. But I think the real challenge is that while we have this commitment to, you know, maintaining, you know, peace and stability, if you look underneath that on virtually any of the issues that you identified at the outset, we have a lot of friction. There is no easy issue with China. And the global financial crisis makes every other issue all that much more difficult.

So I think the other thing probably that Secretary Clinton will or maybe should do is simply to highlight the interdependence of our two countries at this point because, you know, whether you're talking about the global financial crisis or climate change or proliferation issues, all of those issues, the resolution of them, you know, virtually any global challenge today will require a degree of partnership between the United States and China and probably a degree of partnership that we haven't really had to date.

And then I think the other issue, of course, is the issue of human rights. And this is going to be a difficult year for the human rights issue, I think, between the United States and China. I guess Secretary Clinton's press secretary has somehow been forced to reiterate on a number of occasions in the past few days that Secretary Clinton is going to raise this issue certainly and will raise it in the appropriate way at the appropriate time, whatever that means.

But how to do it, I think, is critical. This is going to be the 50th anniversary of the uprising in Tibet. Already there are lots of stirrings in the region. The Dalai Lama is a little bit agitated right now about arrests and things. So that's coming up in March. And then, of course, we have the 20th anniversary of Tienanmen demonstrations and massacre. So there's no doubt in my mind that the State Department is going to have to be prepared to talk about these issues. And how it does that, I think, not in this particular meeting but moving forward, is going to be very important.

I guess the last point I'll make is I think the way perhaps to integrate human rights really has been largely off the agenda over the past eight years. It's fallen off the agenda. I think the way to integrate it may be in addition to pressing individual cases, to highlight the role that, you know, transparency, the rule of law and official accountability within China and within any country play in terms of resolving all those other global issues, like climate change, you know, environmental issues, like good trade, like IPR protection, food safety. All of those issues depend on good governance domestically.

And so I think perhaps one way to talk about political reform and human rights in China might be to advance it under the rubric of those other kinds of issues.

STARES: I asked Sheila about what Japan can do to help out in the global financial crisis. And there's been some concern about China possibly pulling back on its investment in U.S. Treasuries or being -- (inaudible). Is this a real concern? Or is this something that Secretary Clinton is going to seek reassurance about?

ECONOMY: Well, I think it's probably not all that useful to seek reassurance in a way. And I think also the economic portfolio, I think, belongs primarily to Treasury, right? And we've seen Secretary Geithner now have a couple of conversations with his counterparts in China already. And I think, despite the fact that we had some interest emanating from the State Department to sort of seize little more control of this issue, I think it belongs to Treasury.

And so I'm not sure the time is it's necessary to seek reassurance here. I think the Chinese have not had any sort of dramatic selling off of their Treasuries. They've had a sort of slow selling off of, you know, their interests in Fannie Mae and Freddie Mac. Okay. But I think what we really want to get out of the Chinese at this point is, you know, assurances that their markets are going to continue to open and that trade will continue to progress between the two countries because what we really need them to do is to buy our goods.

You know, for example, about five months ago, I guess, the Chinese government, you know, told the aviation industry that they were not to put out any new orders for airplanes. Now, that's a big part of the U.S., you know, trade to China are Boeing airplanes. So I think that's the kind of discussion that needs to take place. But again, I think that's better handled under, you know, a specific discussion like that is better handled with Commerce and USTR and Treasury.

STARES: Okay. Let's open the discussion up. And operator, if you could ask the first on the line to ask their question, I'd appreciate it. Thank you.

OPERATOR: Okay, at this time we'll open the floor for questions. If you would like to ask a question, please press the * key followed by the 1 key on your touch-tone phones now. Questions will be taken in the order they are received.

Our first question comes from Arshad Mohammed with Reuters.

QUESTIONER: Hi. This is a question for Ms. Economy. Could you address a little more squarely how you think Secretary Clinton will raise the human rights issue, sort of how she may thread the needle of, on the one hand, making clear her commitment, Obama's commitment to human rights and our desire to see China make progress there with the imperative, obviously, not to alienate the Chinese leadership on her first formal visit as secretary of State and thereby undermine potential cooperation on Iran and North Korea, all the other major issues?

And secondly, I heard what you said about how the sort of currency issue probably belongs to Treasury despite the sort of rumblings from State about wanting to take a bigger role. Do you think that the sort of, you know, interagency argument over this is going to be settled by the time Secretary Clinton goes? Or do you think there's going to continue to be a little bit of ambiguity perhaps about who speaks for the United States on those matters? And do you think that Secretary Clinton will actually ask the Chinese for specific things on their economy? Do you think, for example, she'll push for them to do more to stimulate domestic demand and thereby have a less export-driven economy.

Sorry. Three long questions.

STARES: A lot of questions there.

ECONOMY: Okay. Let me take them in reverse order, and I'll try to be brief. I think on her list of officials with whom she's planning to meet, I don't believe that she is going to be meeting with Wang Quishan, who is sort of the oversight person for the economy, nor is she, I think, meeting with the Finance Minister (Shoichi ?). So my sense is that, you know, she may make, you know, broad, general statements about continued opening of the Chinese economy and how it is important to stimulate domestic demand. And the Chinese will respond that yes in fact they are doing just that with their own stimulus package and, you know, big inputs into infrastructure and their, you know, gigantic $120 billion, or whatever it is, health plan that was supposed to be by 2020 is now going to be by 2011, you know, that is supposed to then boost consumer confidence and allow consumer demand to develop within the country. So I think they're ready with a response if in fact she does push that issue. But I think she'll do it only in sort of very broad terms.

I think that the issue is being resolved now between who's going to control the issue of, you know, the financial side of the discussions with China. And I think it's going to be resolved in favor of Treasury. I think the outstanding issue is probably climate change and who's going to really maintain sort of and develop the relationship on this climate dialogue. And here, too, I think we have to be careful of how we change things around because the truth is that climate views climate change as an economic issue, not as an environmental issue. It sees it through really an economic lens. And in many respects, to have State Department running that dialogue may not be the most effective sort of way of doing things.

And you know, whether to stay within, you know, sort of a strong environmental and energy component to stay within Treasury, I don't know. Personally, I think it should it should be elevated to the vice president's office. That's more than you asked, but I do think that that's probably the big, outstanding issue of interagency control right now.

Then finally, how is she likely to talk about human rights? You know, the truth is I don't know how she's going to do it. All we know is that she said she's going to do it. It could be as simple a statement as, you know, we recognize that China has made progress, you know, over the past, you know, 30 years of opening and reform and, you know, development of civil society. Clearly, the United States is looking forward with China to continue to develop this effort. And in fact, again, going back to the point I made earlier, that these kinds of, you know, further development of good governance is absolutely essential to China's role as a responsible, you know, stakeholder in the global community.

So that would be how I think she could most effectively introduce the issue at this point.

STARES: Gently, gently.

ECONOMY: Yes. Gently, gently, but put it on the table. I think it's important.

QUESTIONER: Thank you.

STARES: Thank you. Let's move on to the next question.

OPERATOR: Our next question comes from Richard Sisk with The New York Daily News.

QUESTIONER: Thank you. You all seem to be laying out a format here in which the secretary of State will be running interference for Mr. Geithner and his eventual visit to the region. Is that what she's doing? Is that how you see it coming about that the countries she's visiting, the one that they really want to hear from is Geithner?

ECONOMY: Sheila, you want to start, and then I'll go? (Laughter.)

SMITH: Did you hear that long silence on my end? Well, it's a fair point to make. I do think on the Japanese side that the Japanese government, yes, they do want to hear from Secretary Geithner, and they have been communication. But I do think there's also a significant diplomatic agenda they want to discuss with Secretary Clinton. So I think on the Japan side yes, the economy dominates everything, as it does with us and everybody else around the globe, but there is some severe need, I think, felt in Tokyo for this conversation with Secretary Clinton and a positive first step moving forward to the Obama administration in the region.

STARES: Liz.

ECONOMY: I guess I would say that on the China front I think that's probably right. I think they are, you know -- economics, currency, trade sort of dominate the interest on the China side. And they want to understand, you know, what the United States is doing to get its own house in order. And I think they're quite concerned about, you know, protectionist tendencies right now within the U.S. Congress and this buy America effort. So I think that's probably, you know, top of their agenda. I think they're happy to welcome Secretary Clinton to Beijing, but I do think that for them, primarily, they are concerned about the state of the U.S. economy and ensuring that the U.S. economy remains open to Chinese goods.

QUESTIONER: Hi, this is Mary Perkins with the Yomiuri Shimbun. My question is a little off topic. I was wondering if you could speak to Indonesia and why that might be included or why that is being included on this trip. And also on that, do you think that this trip to Indonesia might be laying the groundwork for a possible visit by President Obama in the near future?

STARES: Well, I can jump in and others, obviously, too. Secretary Clinton's spokesperson did say, I think the official line is that she wanted to sort of reach out early to a Muslim world country, and I think we have to take that at face value. They're obviously very keen to improve the image of the United States in the Muslim world. As you indicate, there's also this connection to President Obama. And I would not be surprised if there isn't a visit arranged to Indonesia, maybe not in the next six months but at some point relatively soon.

And there are other important reasons to engage Indonesia, too. It's an extremely important country, large country in Southeast Asia. And there are important economic interests and other concerns that Secretary Clinton has issues to discuss. So I think we should just take it on face value.

ECONOMY: Right. And I think I'll just add a little bit to what Paul said. I think, you know, certainly Indonesia is not, you know, only an important country but it's also a very significant, you know, large democracy within Southeast Asia. And in fact, it's headed for elections this year. So I think it's an opportune time to go. And I guess the talk of President Obama going to Indonesia centered around November and maybe in advance of APEC meeting where he may in fact deliver, you know, some kind of meter speech to the Muslim world. I think those are the rumors that are swirling around. And I think there are other discussions to be had also on human rights and military-to-military relations with Indonesia. I doubt they'll get into specifics of that, but I do think that those are all issues that matter.

And climate change, frankly, although this hasn't been targeted, you know, for this trip except, I think, with regard primarily to China. You know, climate change figures across all these countries. You know, Japan certainly, as one of the leaders of the climate change initiative. Indonesia is a very significant player, in particular, because of its forest. Korea is a kind of, you know, middle-advanced, rising economy. I think it could be an interesting spread that goes across all four countries, although I don't think the visit has been pitched quite that way.

STARES: Next question.

OPERATOR: Our next question come from Dao Alopad (ph) with the Root (ph).

QUESTIONER: Hi. I have (sort of ?) the same question about Indonesia, which is interesting. I know it's not your (wheelhouse ?). Unless you'd like to elaborate a little further about what you said about Indonesia, I essentially have the same query, whether or not you think Indonesia can be a productive partner and how its democratic successes might be a test case for other Muslim populist countries in Asia and in the Muslim world, speaking specifically as perhaps Pakistan or Afghanistan what their democratic success is, which have been remarkable over the last 10 years, might indicate as a sort of template for dealing with other countries in Asia and in the Muslim world.

STARES: Anything to add, Liz?

ECONOMY: No. That's probably pushing past my --

STARES: Right. The only other area that I think there may be discussions on is sort of counterterrorism and Indonesia has made important strides in dealing with the radical Islamists within their country. And so I think that could conceivably be another element that they would discuss. But again, it's moving beyond my area of competence, too. So maybe we should move to the next question.

QUESTIONER: Thanks very much.

OPERATOR: Our next question comes from Mark Landler with The New York Times.

QUESTIONER: Good morning. I guess I've got another question for Liz on the issue of Taiwan. It's pretty clear Taiwan is not high on the agenda on this trip. And I'm wondering whether that is sort of a good-news part of our overall relationship with China and whether there's any scenario you can see where Taiwan does become a source of friction again.

ECONOMY: Well, I think it's not on our agenda in general. It's not usually on our agenda, it's on the Chinese agenda, right? So my guess is they will raise Taiwan, and I think they will raise the arms sale issue. And I think Secretary Clinton can, you know, hopefully point to the fact that relations between Taiwan and the Mainland have been improving. And I think there's room to suggest that Beijing could move along the path, both in terms of reducing, you know, its missiles targeted at Taiwan and also in terms of giving Taiwan some international space, which is under consideration. Beijing just announced that they would allow Taiwan to have direct access to the World Health Organization. And what Taiwan wants is observer status, so we'll see whether that could move forward.

So I think, you know, there's a kind of back-and-forth that can go there but in a relatively controlled way because things do seem to be moving in the right direction.

As to whether I think Taiwan could become an area of friction, you know, again, I think it's an area where, over the past eight years, in fact under the most difficult of circumstances, right, with, you know, Chen Shui-bian as the president of Taiwan, a strong leader of the DPP, very strong, independent sort of motivations within much of the Taiwanese political elite during this period. The U.S. and China and Taiwan manage to keep the relationship quite stable. So at a time when you've got, you know, Ma Ying-jeou moving in a direction, you know, slowly but surely and Beijing moving in a similar direction, I think it's hard for me to see that Taiwan -- there's much likelihood for Taiwan to become a sort of point of real contention or flare-up. I think it would take some kind of extraordinary circumstance and, at this point, likely some kind of instigation by Beijing. But I don't see that happening.

QUESTIONER: Thanks.

STARES: Okay.

OPERATOR: Thank you. I'd like to remind, if you'd like to ask a question, it's the * key followed by the 1 key on your touch-tone phone. Our next question comes from Yan Tai with the World Journal.

QUESTIONER: Hi, Liz. If you can comment a little on this. The media has reported that the Obama administration will show a harder or tougher attitude towards China in the beginning and then you will soften up. Of course, this is just a prediction. I want to ask you if you agree with this prediction and also if you think this trip Ms. Clinton will convey this kind of attitude during this trip to Beijing.

ECONOMY: You know, I think that that kind of prediction comes from sort of the history of U.S.-China relations. And you know, every time we have a new president, they tend to take this tough line toward China. They come in sort of with a tough perspective on China and then gradually, as they begin to understand the importance of China to the United States and to the rest of the world, you know, they sort of ease up. I think the situation is different this time. I think the situation of the United States and its relationship with China is different. Our sort of relative leverage and power in the relationship is quite different. And we also have structures in place, I think, that have facilitated a lot of communication.

I mean, say what you will, but over the last three years, I guess, since we've had the strategic economic dialogue, that really did put in place a bureaucratic infrastructure for continued dialogue. And we also had the senior dialogue on the State Department side. So I think there's a lot of talking going on that was not characteristic of the period before this one. You know, again I point to the fact that Secretary Geithner has already had several conversations with his counterparts in China. So I think it's a different set of political and economic circumstances today. And I don't anticipate that same kind of come in and be tough on China and then sort of loosen up as time goes on.

QUESTIONER: Hi. This is Felicia from the Asahi Shimbun. Thanks so much for having this call. My question is for Elizabeth, and it's regarding something you brought up earlier about the anniversary is coming up this year. I know it's hard to speak of hypotheticals, but if something does happen on the Chinese side in terms of protests either around Tienanmen or in Tibet, how do you anticipate the administration responding?

ECONOMY: It is difficult. You know, my guess is that it would be the ideal opportunity to highlight the change, hopefully, that's taken place in China, you know, depending on how the Chinese government reacts. But certainly, if the United States and others, you know, early on went in and talked about, you know, the different way that the Chinese government responds to, you know, demonstrations now from before, that that might be the best of all scenarios.

And you know in fact, if you look, you know, the Chinese government now is concerned about social unrest, you know, widely throughout the country, right? So well over 100,000 now protests and strikes. And the message that's being transmitted from the central government down is not to use the police, right? Now, these are for local protests. But the idea is that political leaders should try to negotiate things down first, that political leaders shouldn't be hiding behind the police. And so there should be an acknowledgment of whatever problem it is that has been spurring this unrest and then a much more nuanced sort of response from the Chinese government.

Now of course, Tibet and Tienanmen are fundamentally, you know, different beasts. And it does look to me as though the way that Beijing is hoping to head off unrest in Tibet situation is by arresting every single potential source of that unrest in advance of the anniversary. And I think with Tienanmen, similarly, they will be looking, you know, for any sign, you know, on the Internet or, you know, throughout their entire public security apparatus trying to head off any kind of unrest.

You know, clearly, we're not going to react by shutting down relations with China. I think this is a far different situation in terms of the way our two countries are integrated and the issues we have at stake. But I also think that if there were a similar Chinese response, it would require a pretty serious condemnation by the U.S. government.

STARES: Okay.

OPERATOR: There are no more questions at this time.

STARES: No more questions.

OPERATOR: Oh, we may have one more question with Jay Shree Bazoria (ph) with CFR.

QUESTIONER: Hi. My question is for Sheila. In terms of some of the countries that Secretary Clinton is visiting, especially South Korea and Japan, these countries have their own domestic troubles besides financial crisis. Japan has a very weak government, and South Korea had problems in its parliament when it was trying to pass this free trade policy with the United States. I wonder if you think this poses any sort of challenges to Secretary Clinton and the United States when it tries to reach out to these allies and what those challenges may be.

SMITH: Thank you. Yes, it does. And I think the challenges are slightly different for her visit to Japan than they are for South Korea. So let me start with Japan. The Japanese have been getting ready for a lower house election for over a year now. And they will have to have that lower house election this year before September. And I think what everybody anticipates is that the major opposition party, the Democratic Party of Japan, will have a real viable chance of winning that election, if not winning an outright majority at least winning enough of a majority that, in coalition with other small opposition parties, they will then be the ruling party of Japan. So I think there's anticipation here that Japan will be going through a process of shaky and somewhat unsettled governance as a result of these electoral dynamics.

This new party has a very clear manifesto. It has policies and domestic and foreign policies already on its website. Everybody has been looking at them with great interest for more than a year now. So I don't think we're going to get a great surprise if the Democratic Party of Japan comes into power.

But what is not so clear is how much of a mandate the Japanese voter might give them. What is not so clear as we sit in Washington is how much of the foreign policy vision this new party would bring to the governance and the decision-making in Tokyo. So I think, especially on alliance issues, questions of our deterrence, questions of North Korea, the U.S. forces on the ground that are being realigned, et cetera, that narrow interpretation of our alliance, the DPJ has been somewhat critical of the existing policies. And so for many people in the government here in Washington, they are a little bit nervous about what this might mean for alliance management.

But more broadly speaking, I don't know that the DPJ has yet found its way to a vision for Japan's own foreign policy objectives. Japan's place in Northeast Asia is still a little somewhat murky. If you talk to the DPJ, they feel strongly that Japan needs to engage and have a close relationship with China. Their approach to six-party talks, for example, is somewhat less clear.

So in the region, they have some tendencies, let's say, but not a clearly articulated strategy. And I think that's something that, for us, it will take us a while to get to know them and to understand how they want to move Japan forward.

But I think the larger problem or challenge for us is that, you know, the Japanese are quite accustomed to our government changing every four years or every eight years recently. We don't have a model of how this move towards a potential two-party system in Japan would play out in terms of our relationship with Japan. So I think the Obama administration will have to be patient. I think they'll have to take care that alliance and alliance policy doesn't become a political football in Tokyo.

You know, each party, the conservatives now in power and the Democratic Party hoping to take power, will want the alliance to be on their side. And so it will require some deft management, I think, on the part of Secretary Clinton and others in the administration not to get entrapped into that dynamic until we get past the lower house election.

I think in South Korea you have a president who's been embattled from about two or three months into his new administration. Many of us visited South Korea for a CFR project last summer at the precise moment when thousands of South Koreans were on the streets protesting the beef agreement. There were thousands of police mobilized and, you know, the Blue House where President Lee Myung-bak resides had, you know, shipping containers, blockades in front of it. That's not the image of Korean democracy that most of us have come accustomed to lately.

And so I think you've got a dynamic in South Korea with a conservative president trying very hard to win the hearts and minds of his own public but also trying to work with the United States. And so I think the Obama administration, on the trade especially, on the KORUS, the trade agreement with South Korea, is going to feel some deep emotions and some intense scrutiny from the Korean public as well as from the government. And so I hope that this is an area where, you know, Obama will take a fairly assertive position vis-a-vis the U.S. Congress. But again, we are back into the realm of trade, and that conversation here in Washington still seems to be a little bit unclear in my mind.

QUESTIONER: Thank you.

STARES: Good.

OPERATOR: Our next question comes from Arshad Mohammed with Reuters.

QUESTIONER: Just a quick follow up to that. I gather there have been at least one Japanese media report that Secretary Clinton might meet with DPJ Leader Ozawa. And I'm told that this has stirred up a lot of anxiety in the government. You know, as somebody who travels with the secretary, this is by no means unusual, I think. We see her meet opposition leaders all over the place. She goes to Israel, you know, where Rice met Netanyahu. And this is not an unusual thing, I think. But to your knowledge, would it be an unusual thing in Japan for Clinton to meet Ozawa? And would it be particularly sensitive now given the fragility of the current government?

SMITH: Yeah, that's a very good question. I think given this dynamic of, you know, a half century of conservative governance and -- (inaudible) -- was part of that process up until the mid 1990s. There is anxiety about just about everything right now as we get closer to this lower house election. I think the Liberal Democratic Party would be very nervous about the impression that that might give that a Democratic U.S. administration was in fact going to reach out to a potentially new democratic government of Japan.

That being said, however, it is normal, I think, in our diplomacy for American leaders to meet and discuss and understand opposition leaders in the democracies throughout the world. I think that is part of the adjustment that we're going to have to make in the U.S.-Japan alliance. And so I think if Secretary Clinton decided to meet with Mr. Ozawa I think there would be some care that would need to be taken that this was going to be a normal practice in the future. In other words, Mr. Ozawa wouldn't have an opportunity to use this to his political advantage. And if there was a certain amount of assurances on the part of Mr. Ozawa that that could be managed seriously, I think that she should meet him.

Yes, it will create a lot of nervousness, but I think we are moving now in the U.S.-Japan relationship to a stage where even if the Democratic Party did not win or does not win in this next election, we are probably going to see a Democratic Party or an opposition coalition in power sooner rather than later. And I think we have to start moving in the direction of understanding the variety of views that are in Japan and that reflect the concerns of the Japanese people.

STARES: Great, thank you very much. That was helpful.

SMITH: You're welcome.

OPERATOR: Our next question comes from Betty Lin with the World Journal.

QUESTIONER: Hi. There's talk that maybe Vice President Biden's office would oversee or in charge of the overall U.S.-China senior dialogue. Is that the case? And is this still under the discussion? And also, there's another talk Hillary Clinton may resume the U.S.-China military-to-military relationship. And what do you know about that?

ECONOMY: I think the idea of having Vice President Biden oversee at least a good portion of the U.S.-China dialogue maybe on the economic and financial and climate change front has certainly been floated within Washington. I don't know that anything has been decided one way or the other, but it certainly is one of the sort of bureaucratic structures that has been suggested.

I think also that the idea of restarting the mil-to-mil relationship with China is something that the administration would like to see happen. It's something that, I think, China, you know, is interested in having happen. And you know, Secretary of State Clinton, you know, may well, you know, raise this as an issue where we'd like to see, you know, progress and have things move forward. But you know, this mil-to-mil relationship is run out of the Defense Department and not out of the State Department.

So again, I think, you know, she can sort of cut across a wide swath of issues and open doors, but I think in terms of actually running things that's not going to be her bailiwick.

STARES: Okay. Do we have any other questions.

OPERATOR: There are no more questions at this time.

STARES: Okay. Well, I think we can wrap this up. This has been a very interesting discussion, I hope useful to those on the line. Again, I want to thank Liz Economy and Sheila Smith for joining us and for the rest of you for tuning in. Thank you very much.

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